Ep. 49 | New Retailers’ Customer Analytics Strategies

This week in the Accelerator host Allison Hartsoe highlights the best excerpts from four new retail episodes. She picks up customer analytics strategies from WinkyLux, The Bouqs, Digital Mortar and Wharton Professor and author Peter Fader. Finally, she wraps up with two insights to take away from these episodes.    

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Allison Hartsoe [00:01] This is the Customer Equity Accelerator. If you are a marketing executive who wants to deliver bottom-line impact by identifying and connecting with revenue generating customers, then this is the show for you. I’m your host, Allison Hartsoe, CEO of Ambition Data. Each week I bring you the leaders behind the customer-centric revolution who share their expert advice. Are you ready to accelerate? Then let’s go!

Allison Hartsoe [00:37] Welcome everyone. Today’s show is a summary of the past four podcasts, focusing on new retailers, a new offline measurement tool, and finally what retailers should be doing with Black Friday. There’s a lot more to the retail subject so we won’t be stopping[LM2] with this series, but in case you are wondering, Hey Allison, why did you choose to spend a whole month on this topic? Let me tell you, as you may know, this podcast is about accelerating customer equity, which basically means nurturing and being of service to your customer base in such a strategic way that you both win. Your company gains long-term revenue and your customers see more valuable and satisfying products that fill a need in their lives.

Allison Hartsoe [01:24] Now, if that sounds lofty, maybe, but take a look at what some of these new brands are standing for, things like feminine power, sustainable flower farming, they tend to connect and align with empowered consumers, and that my friends is where it’s at. So let’s dig into that theme a little bit more. First up in our series was Kate Fernandez from beauty innovator, Winky Lux. I invited Kate on the show for two reasons. First, the company is just only three years old, but it’s paying really good attention to CLV and you know, we love that on this show. Kate talked about how using traditional page views and sales metrics would have led them down the path of cutting a product for lackluster performance. And frankly, that’s what a lot of companies do. They look at basic metrics, aggregate metrics, and they don’t really look at them in a very precise fashion. But what Winky Lux did, uh, with the help of Custora, they actually looked a little deeper at who was buying it. And here’s Kate sharing little more about what they did.

Kate Fernandez [02:39] The data that we were getting, from our email service provider, from our eCommerce platform, from our social media analytic tool. It just wasn’t rich enough for us to kind of make the decisions that we wanted to make and really flush out things like our email marketing strategy. So we’re, we’re looking at the data on Custora specifically, lifetime value data and for was we were going to kill a product. We were going to kill, um, our glossy boss, which is, is there a good gloss? But it’s underwhelming in that it’s a gloss, you know, there are a lot of different glosses out there, um, like, oh, you know, maybe we should just kill this view. We see the data on customer and it ends up that while the glosses and seem like one of our best sellers, it actually has the highest lifetime value attached to it. And we ended up, now we’re slating theme shade extension for next year.

Kate Fernandez [03:29] So that kind of helped us in our product strategy. Same thing with, you know, our unibrow, we were worried about the unibrow, unibrows, um, it’s a universal eyebrow pencil. So the unibrow is a funny name, but, we were worried, it’s one of those products that when a woman chooses her eyebrow pencil, it’s sticky, you know she’s going to go back to that eyebrow pencil because she knows that it works and products like that are slow on the uptake in the beginning because you know, you really have to convince the girl or the man, you know, I don’t judge whether or not they should be using this and then once they have it in their hands, the hope is that they become returning customers and we see with Custora that that’s the case. And now we’re definitely thinking about making the second version that might be like a micro, based on some reviews that we’ve had and the data that we found on the Custora.

Allison Hartsoe [04:18] So, let’s talk about that a minute because I want to make sure people understand when you say lifetime value, you’re not talking about the lifetime value of the product or the product volume sales. As we talk about on this show quite a lot, we talk about customer lifetime value. So, what you are seeing is that, people buying a certain product, had a longer life, had a higher lifetime value spend or perhaps an interesting trend line that made you say, hey, we don’t want to kill that product because that’s just going to, it’s actually called the product death spiral. There’s a great example that Pete Fader uses in his Wharton classes and I don’t know if it came from there originally, but his example goes something like this, like a grocery store sees that they have a certain spread of products, and some are making money and some aren’t. They start cutting out the ones that aren’t making money, but as a result, the sales spiral down and down and down because people who are valuable customers, when you change the lens that we’re buying, let’s say beer and diapers were suddenly not able to get the beer so they don’t buy the diapers, so you invoke this spiral.

Kate Fernandez [05:30] Exactly.

Allison Hartsoe [05:30] And second, I thought the way that Winky Lux emphasizes the brand and introduces it to new customers was very innovative and I actually experienced this myself. The purpose is to connect a new or maybe a dappling customer, like somebody who’s just had a little experience with the brand and help them by introducing the brand’s personality. Almost like you’d introduce a friend, you get to know a little bit more about the products, why they were developed, what the rationale was behind them instead of just seeing the basic packaging you get to experience the products. Here’s what Kate says about that experience.

Kate Fernandez [06:20] The people we were meeting in real life were three times more likely to return to us and be loyal to us on digital. So, the experience stores are almost kind of like the feature of acquisition for us. Um, we feel like when, when a, when a customer comes into the store and they see all of the pink, they see the flowers, they see the packaging and then they see this curtain and they’re like, what is behind the curtain? And we’re like, well, it’s our experience, you know, it’s a play land of product themes. Our installations where you know, the focus, while it is product name, the focus is not to sell a product. The focus is to give the customer an experience to give them a connection to the brand so they really understand the brand and it’s that understanding that drives loyalty.

Allison Hartsoe [07:05] In the next episode, I spoke with Phil Irvine from TheBougs. TheBougs is a new internet retailer based on flowers and you might say, oh my gosh, aren’t there so many of those, you know, didn’t want 800 flowers, just take it all and the answer is, no! In fact, they didn’t. TheBougs has found a very interesting niche around sustainable flower farming. Phil had more examples of how CLV was used to correctly adjust the mix of email communications so that you had a broader blend of get in the game kind of email communications alongside trigger based email communications which targeted the right customers with the right promotions. Then he went on to actually share a bit about the right customer metrics and the kind of opportunities that he thinks still remain out there. He’ll, here’s a bit about what Phil had to say about the campaigns and then about the customer metrics behind them.

Phil Irvine [08:11] When I first got here, all we really had in place were, you know, kind of typical for ECOMMERCE company order confirmation emails, shipping confirmation, order delivered type of campaigns. We had an abandoned cart email series, but outside of that we really didn’t have any trigger or event based types of campaigns and I think the mix was 70 percent promotional versus 30 percent on the triggered basis as far as the revenue distribution and as I’ve kind of come in here and works with the team and leverage a lot of new tools that we have in place, we’ve been able to adjust that mix to be more 50/50 and just conceptually the optimal state that an organization wants to get to in sending a communication to a customer that’s most relevant and most timely where it’s gonna make sense to the customer to engage with a brand. Versus previously we were kind of just sending mass blast promotions to everybody where are most engaged customers. They were extremely interested but you know, for some, that just maybe weren’t in market to gift at the time. Um, you know, it wasn’t relevant for them.

Phil Irvine [09:22] Having a bigger focus on the customers that have either showed or have the potential to show more value in terms of dollars, referrals, potential to sign up for subscriptions and specifically going after that cohort of customers with paid media channels, there is going to justify the CAC to LTV ratio, that makes sense to, to, to scale profitably.

Allison Hartsoe [09:47] That’s right. That makes perfect sense. And I love that approach because I think it’s fairly unique. Just like you said before, people tend to stop at CAC only, which is customer acquisition cost and they don’t really look at the longterm value. Um, so it sounds like you’re definitely doing that. What are areas where you want to do more or you think you could get more out of CLV?

Phil Irvine [10:09] You know we’re still at the early stages of, having this in market on, you know, kind of an automated basis. We’re still in a mode where we’re doing one off tasks to continue to justify this. I think there’s a big area of opportunity is when you think of kind of optimal digital experiences, you know, with customers these days and especially millennials, video content is crucial to capture the attention of the average customer and I think a big opportunity for us is trying to align video experiences that tie into how we want to differentiate ourselves of capturing life meaningful moments. And I think in the future for us is how can we surface compelling video content that’ll further engage our customer base to stay loyal to the books versus other competitors in the space. Um, you know, we have some video content that’s out in the market on our website. We do some engagement type social through instagram and facebook, but it’s not really targeted to specific customers and I think that’s a huge opportunity for us, like based off of customer preferences or we know recipients that they like to buy for, you know, an idea was thrown out there is aligning video content about gifting to mothers, say for instance, to people that we know has to the past.

Phil Irvine [11:34] So I think, I think that’s really where we’re trying to go in the future here.

Allison Hartsoe [11:41] Then our Episodes got closer to thanksgiving, and, Im frankly wanted to find a symbolic way just to give back a bit. So the next two interviews were with advisors to my company, first, my dear friend and mentor, Gary Angel who taught me everything I know about digital measurement. Uh, he literally wrote the book on measuring the digital world and that is what it’s called, measuring the digital world and you should go and buy it right now, but he hasn’t stopped there. Gary has a new company called digital mortar and it applies some of the same online measurement richness and precision to the offline world. And that’s no easy task. It’s literally like web analytics and the late 19 nineties when we were looking at web blogs, he’s got his work cut out for him. Uh, but Gary goes on to talk about how in person brand experiences just have tremendous power and the in store brand experience is really designed to support or road the lifetime value of a customer. So here’s a little bit about what Gary has to say

Phil Irvine [12:51] that I think is really interesting, and kind of gratifying too, is that you see some really good internet brands these days starting to open up stores. And I think that speaks to the fact that in person experience is an incredibly powerful branding experience. You know, when we used to do, we should do a lot of pretty sophisticated analytics around a lot of different problems and retention insurance was one of the problems that I studied pretty frequently and invariably when we built churn models, the things that drove churn, we’re often in person interactions, you know, the interactions you had with a terrible call center experience, or I went into the store and they rude to me or I had to stand in line for 45 minutes so I’m never going back there again. Those in person experiences are tremendously impactful brand builders for good and ill. And I think it’s both sides of that.

Phil Irvine [13:39] And I do agree to. I think you know, people sometimes assume that high value customers that they captured all of them. Well that’s not true. Obviously there’s constant churn in that population. There’s figuring out who the new potential high value customers are and how you get them into your program so that you can make sure that they get the kind of personalized attention you want. And I think this kind of in store measurement allows you to sort of expand down your reach in terms of understanding who shoppers are, not just the people who are absolute top tier wealthy program, credit card holding shoppers, but all the rest of the people delivering great experiences as people obviously matters to. Um, and I think it allows you really to understand much better where those people are, where they fit in that product value chain.

Allison Hartsoe [14:23] And finally I wrapped up the pre Thanksgiving thank you feast with Pete Fader. Pete is a quantitative marketing professor from wharton before there really was such a thing and he wrote the book on Customer Centricity. Literally it’s called customer centricity. Focus on the right customers for strategic advantage. And now he has a new book called the customer centricity playbook. And if you listened to the episode, the full episode, there’s actually a discount code that we give toward the end of the episode. Should you like to go and buy it with a nice 30 percent discount? So in this episode, Pete just rails on the stupidity of black Friday as a retail event, but he stopped short of saying that it should be eliminated altogether. Instead, he urges retailers to think more about the long term purpose of such an event and how perhaps it could be used to fuel the greater good of building up your best customers instead of catering to your worst. I highly recommend listening to this full episode, but here’s a big snippet of our conversation. The combination of digital and customer lifetime value is just, I think almost unbeatable. It’s a fantastic tool.

Pete Fader [15:40] So true, so true. And that’s really what would lead to the revelations that I mentioned at the outset. Uh, the idea that, that not all customers are created equal and there are observable aspects, whether it’s behavior, sometimes it’s demographics, but usually not, uh, but, but, but, uh, things that they do or just things about the customer that can be indicative of what they’ll be worth over the long run. So we really can start to talk about lifetime value even before we’ve seen you live your whole life and that’s what gives us pivot towards customer centricity, the fact that we can anticipate, maybe not right all the time, but we can anticipate which customers are likely to be the most valuable ones. And so if we have a limited number of touches that we can give out, if the, if we’re going to kind of queue up our customers, have some kind of priority for customer service, for some other bonuses that we’re giving out that we should be willing to kind of go out on a limb and say, you know what? I think these customers over here, we’re going to be the good ones, more than those over there and we should now have the, the courage, the ability to pick and choose like that. And that’s what drives us in this direction of customers’ centricity, it all starts with CLV. But it really requires us to be able to get those early signals and the ability to take action on this.

Allison Hartsoe [16:59] Now that is a fantastic queue up to black Friday. So tell us a little bit about why you think black Friday is a bad way for retail to go about getting new business.

Pete Fader [17:14] So let’s start with the kind of the, the snarkiness most sarcastic, cynical, skeptical way to look at it and then we can kind of work backwards to kind of put it on a proper perspective. Black Friday is the day when you identify your worst, worst, worst customers and treat them like royalty. Okay? Oh you terrible customers. All your customers who are very price sensitive and you rarely buy with us except when we have stuff on sale and you’re kind of difficult to manage. We are going to line all of you up and we’re gonna have special hours. We’re going to pay our employees double just to let you destroy our store and buy stuff at deep deep discounts knowing full well that you won’t be back again until this time next year. Does that sound like a recipe for success or what? Uh, now again, I’m overstating a little bit, but that’s the spirit of it is what black Friday is all about, is going against everything that we were just saying that not all customers are created equal. So let’s take the worst ones and do far more for them and with them than we should.

Allison Hartsoe [18:20] So why do you think companies do this?

Pete Fader [18:24] Couple reasons. Number one, a, the, a lot of companies out there that don’t have the visibility into the individual customers and they don’t believe what I’m saying. And they say here, all that caching going on. We’re selling a lot of stuff. Let’s not worry about tomorrow. Let’s just celebrate today. So there’s a lot of that just getting kind of caught up in the moment. Um, there’s also the naive belief that if we can be their best friend, then all of a sudden they will turn from ugly ducklings into beautiful swans and that once we have information about them and we have this touch point with them, that we can start cross selling and upselling and they’re gonna love us and they’re going to buy from us more often and at full price, yeah, right. And then the third part is, it’s just competition. We know that our competitors are doing it and so we better do it too because we don’t want to get caught flat footed, so there’s just a lot of reasons that in and of themselves are actually kind of understandable, but when you do step back and look at the big picture, which is the future projected value of customers and value of the customer base as a whole, that it’s not really a good thing to do.

Allison Hartsoe [19:36] Now, all these episodes are available on ambition data.com/podcast and I highly recommend if you like a little bit of a snippet that you heard from one of the guests, then you’ll probably like the full episode. Please do go and pick it up and hear the full thing. These summaries and codenotes that I do once in a while are great for folks who just didn’t have a chance to catch that episode or maybe he missed one or two along the way. That’s the reason why I do this, but it’s really designed not to give you all the richness, but to give you a taste of some of the best stuff that’s in those episodes and you can go and catch the full amount on the full episode. So now what should you take away from all these experts? I really have two points. One is, I know folks say this all the time, but it’s really not offline or online or digital versus real world.

Allison Hartsoe [20:33] Why? Why is that? Because when you think through the customer’s point of view, then you bread is like a person and it’s really even more like a friend. And my friendships don’t change just because I talked to you via online channels like Facebook or email versus what I might see you in person. And I sure hope yours don’t either. Further, a person is not a channel. This drives me bananas when people are always talking about channel, channel, channel. It’s people that we’re selling to. So Watch your language and get your head out of your channel. Use more internal language to reflect people talking to other people in one customer centric world. Take it from Gary and Kate and Phil. They know what they’re talking about, and second, that brings me to why is it so hard for traditional companies to change? Well, Pete points out that the short term sales and the competitive pressures are very good.

Allison Hartsoe [21:40] Not necessarily good, but they’re very important pieces that feed a sacred cow like black Friday, they just exist. But there are a ton of incentives and processes and people that are keeping the old ways in place. Look around your company. Can you point to a chief customer officer? Do people own channel operations like website and email? Where’s the person who owns the high value customers? What is that department and who monitors how these folks are feeling and what they might need? Now, if you’re the CEO, don’t let anything like the org chart or a poorly configured martech[LM3] tool come between you and a deep knowledge of your customers, especially their longterm potential. Your team needs air cover to make this change towards more customer centric knowledge, more customer centric language, but that deep comprehensive customer knowledge should be your number one priority, especially going into 2019, because the new retailers, they don’t have any legacy hangups and they’re going after it like gang busters.

Allison Hartsoe [22:55] Now, if you want to talk more about this subject or perhaps find a way to calculate the value of your own customer base, you can reach me at allison[LM4] at ambition data or at a Hartsville on twitter or allison hartsoe on Linkedin. We’ve got many ways to help you improve your customer centricity even if you have no idea who’s interacting with you today. So as always, links to everything we discussed, especially these episodes that I referred to are@ambitiondata.com slash podcast. Thank you as always for joining me today. Remember, when you use your data effectively, you can build customer equity. It’s not magic, it’s just a very specific journey that you can follow to get results.

Allison[LM5] Hartsoe [23:43] Thank you for joining today’s show. This is your host, Alison Hartsoe, and I have two gifts for you. First, I’ve written a guide for the customer centric Cmo, which contains some of the best ideas from this podcast, and you can receive it right now. Simply text, ambitiondata, one word to, three, one, nine, nine, six, (31996) and after you get that white paper, you’ll have the option for the second gift, which is to receive The Signal. Once a month. I put together a list of three to five things I’ve seen that represent customer equity signal not noise, and believe me, there’s a lot of noise out there. Things I include could be smart tools. I’ve run across, articles I’ve shared cool statistics, or people and companies I think are making amazing progress as they build customer equity. I hope you enjoy the CMO guide and The Signal. See you next week on the Customer Equity Accelerator.